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Strong earnings growth in the industry The latest survey report of Chemical Engineering News shows that the profitability of global chemical companies in 2005 continued the trend of growth in 2004. The profits of chemical companies generally rose sharply in the first quarter, and the profits of 24 companies surveyed were higher than last year. It increased by 55% over the same period, with sales revenue of 39.3 billion U.S. dollars and profit of 4 billion U.S. dollars.
The rising prices of crude oil and natural gas have driven the continued rise in the prices of chemicals. Chemical production maintained steady growth throughout the year, but due to two hurricanes, the price of basic chemicals in the United States was soaring. It rose an average of 6.8% in September and rose by 3.8% in October; the high raw material prices at the end of the third quarter and The impact of hurricanes emerged, and the profit growth of the chemical industry slowed markedly to its lowest level since the third quarter of 2003, but it remained profitable. The profits of the 24 companies participating in the survey increased by 22.9% from the same period in 2004 to $2.5 billion.
The report of the American Chemical Industry Committee (ACC) stated that chemical production will increase slightly by 0.5% in 2005 and increase by 3.1% in 2004. In particular, basic chemicals are the most affected, and it is estimated that they will decrease by 4.7%. However, the specialty chemicals and pharmaceutical industries still maintain a rapid growth rate. It is expected that the US chemical industry will grow by 2.7% next year, especially plastic resins will lead the growth with a growth rate of 4.9%.
Corporate mergers and acquisitions remain active The latest statistical data from New York-based investment banking firm Y&P shows that global M&A activity in the first three quarters of 2005 was relatively stable, and annual M&A activity remained at a normal level. It is expected that the volume of M&A transactions completed this year will be reduced by 15% to 20% from the previous year, to a level of approximately US$25 billion. Global industrial M&A transactions in 2006 will remain at this year's level.
Y&P pointed out that the first three quarters of this year, chemical M&A transactions were mainly in the area of ​​basic chemicals. Ineos, which was not known a few years ago, acquired BP’s billion-olefin olefins and derivatives subsidiary business for US$9 billion and became the sixth-largest chemical company in the world with annual sales of US$26 billion. Access Industries acquired Basel, a joint-venture polyolefin producer of BASF and Shell, for US$5.4 billion. Basel is the world’s largest polypropylene producer and a leading provider of polyethylene and catalysts. The company’s sales last year were US$8.3 billion.
Y&P Company stated that Europe still occupies a dominant position in the global chemical M&A business. In the first three quarters of this year, 41% of globally completed M&A transactions occurred in Europe. The proportion of U.S. M&A transactions has dropped significantly from 37% in the same period last year to 26 this year. %. The proportion of chemical M&A transactions in Asia and other regions rose sharply from 14% in the same period last year to 33% this year.
Asia and the Middle East are Investment Hot Spots The Asia-Pacific region, especially China’s petrochemical industry, is in a strong growth period, and the demand for chemical products is showing rapid growth. With a large population, abundant raw materials, and rapid economic development, the region has a huge potential in the chemical consumer market and is a hot spot for investment by transnational chemical companies.
Several large-scale petrochemical projects have been completed and put into operation in China this year. Shanghai SECCO ethylene and Nanjing Yangba projects, such as the joint venture between BP and Sinopec, have been successfully put into operation. The Shell/CNOOC project with an investment of US$4.3 billion will be completed by the end of the year. In addition, DuPont plans to invest US$1 billion to build a world-scale titanium dioxide production plant in Dongying, Shandong Province, and plans to start production in 2010. Wacker Chemicals and Dow Corning also announced that they will invest millions of dollars to build a joint venture silicone factory in Shanghai.
The Middle East has cheap and abundant oil and gas resources and has become a hot spot for investment by multinational chemical companies. In the next 10 years, the ethylene production capacity in the Middle East will double to 30 million tons/year, and propylene capacity will triple to 7 million tons/year. Borealis and the Abu Dhabi National Oil Company are planning to invest 2.5 billion U.S. dollars to build a large-scale petrochemical project, which is scheduled to be completed in 2010; billion U.S. and Saudi companies will invest 2 billion U.S. dollars to build a comprehensive petrochemical plant, which is scheduled to be completed in 2008; Saudi Sabic Company Also plans to build an ethylene cracker before 2012.
Recalling the impending 2005, the world's chemical industry has shown continuous growth, chemical companies have seen strong earnings growth, and chemical prices have generally risen. At the same time, the high prices of international crude oil and natural gas, and the hurricanes that hit the United States twice, have had a serious impact on the global chemical industry, especially directly affecting the US chemical industry.